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» EXPERTS SEE RISK OF A HOUSING BUBBLE IN FED POLICIES A majority of real estate experts responding to a recent Zillow survey expressed some concern that the Federal Reserve's current policies could lead to another housing bubble. Only 4 percent of respondents are not at all worried about a bubble resulting from the Fed's monetary policies which are keeping mortgage rates low. However, 48 percent see the Fed's actions as "a little risky," and the remaining 48 percent categorized the risk as "moderate to high." "How the Federal Reserve handles the eventual winding down of its policy of quantitative easing will be critical in determining if the current period of rapid appreciation is a benign bounce off the bottom or a more dangerous bubble being re-inflated," said Stan Humphries, Zillow's chief economist. The more than 100 survey respondents expect home prices to continue their upward trajectory this year and into the next few years. However, the general consensus is that price increases will slow after the next year or so. Experts expect prices to end this year 5.4 percent higher than their level at the start of 2013. After closing out 2012 at $156,800, the median price would be $165,280 at the end of this year, according to the forecast consensus of those surveyed by Zillow. From 2015 through 2017, experts suggest a more modest rise per year of 3.5 to 3.7 percent. A cumulative rise of 22.3 percent is forecast through 2017. The accelerated appreciation over the next year is "consistent with a market struggling to satisfy strong demand from buyers attracted by rock-bottom interest rates and improving economic conditions," Humphries said. However, as interest rates eventually move up from their current lows, price appreciation must slow or homes will "look very expensive relative to people's incomes as it gets more costly to finance a home," he added. The Zillow survey, conducted by Pulsenomics, also inquired about whether the definition of a qualified residential mortgage (QRM) should include a minimum down payment. "Contrary to concerns expressed by certain policymakers, only a small minority of our expert panelists believe that including a minimum down payment requirement in QRM would pose a threat to the housing recovery," noted Terry Loebs, founder of Pulsenomics. About 81 percent support the idea of a minimum down payment requirement and about one-third support a down payment requirement of 20 percent or more. VISIT US ONLINE @ DSNEWS.COM FORECLOSURE FILINGS DROP TO 74-MONTH LOW, JUDICIAL STATE AUCTIONS RISE Foreclosure activity in April fell to a 74-month low across the country, but many judicial states are experiencing rising foreclosures. Furthermore, judicial foreclosure auctions reached a 30-month high, according to RealtyTrac's April U.S. Foreclosure Market Report. One in every 905 homes in the country received a foreclosure filing in April, while the total number of filings—which includes default notices, scheduled auctions, and bank repossessions—declined 5 percent from March and 23 percent from April 2012. April's scheduled judicial foreclosure auctions, which reached their highest level in 30 months, demonstrated a 22 percent monthly increase and a 31 percent annual increase. In contrast, non-judicial foreclosure auctions hit an 88-month low, falling 43 percent from April of last year. "Foreclosure starts have been increasing for several months in many of the judicial states, and now that increased volume is showing up in the second stage of the process: the public foreclosure auction," said Daren Blomquist, VP at RealtyTrac. Fifteen of the 26 judicial foreclosure states in the nation experienced an increase in foreclosure auctions in April. The increase is "evidence that lenders are serious about moving forward with completing the foreclosure process," Blomquist said. Real estate agents in some areas with high foreclosure rates see the increase as a positive rather than a hindrance. "The jump in scheduled foreclosure auctions should bring some much needed relief to both the Oklahoma City and Tulsa areas, where inventory is extremely tight, as many of these properties will end up repossessed by lenders and then listed for sale," said Sheldon Detrick, CEO of Prudential Alliance Realty in Oklahoma City and Prudential Detrick Realty in Tulsa, Oklahoma. Oklahoma experienced a 57 percent increase in scheduled foreclosure auctions in April when compared to a year earlier. Similarly, Rich Cosner, president of Prudential California Realty in Orange, Riverside, and San Bernardino counties said, "[Y]ou could put five times the number of [notices of defaults] on the market and the homes would be sold in less than 30 days." Statewide in California, foreclosure starts jumped 13 percent from March to April. It marked the third consecutive month of increases in new foreclosures in the Golden State after they hit a 90-month low in January, when new legislation—the California Homeowner Bill of Rights—took effect. Across all states, RealtyTrac says Nevada ranked No. 1 for foreclosures in April, despite a 15 percent decline from March and a 17 percent decline over the past year. Florida ranked No. 2, even with a 27 percent monthly decline in filings. Ohio posted the third-highest state foreclosure rate and is home to the highest-ranking metro with a population of at least 200,000— Akron, Ohio. Underwater homeowners continue to make up a significant portion of the market. At the start of May, RealtyTrac reports 26 percent of all homeowners with outstanding mortgages held mortgage loans in amounts totaling at least 25 percent more than their home is currently worth. VERBOSITY "My professional firms and I are currently reviewing the banks' compliance with the servicing standards. Based on my conversations with consumer professionals, elected officials, and distressed borrowers, I know there are areas in which the banks still have work to do, and I am using that insight to determine if there are gaps that require future testing." —Joseph A. Smith, Settlement Monitor 27

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